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Minnesota – Taxability of Products Labeled Dietary Supplements

SALT Report 2421 – A Minnesota Tax Court issued a ruling regarding whether a product is taxable as a dietary supplement if the label identifies it as a dietary supplement. The Taxpayer in this case, operates a chain of weight control centers nationwide. As a part of its weight loss program the Taxpayer sells food, beverages, and nutritional supplements.

The product in question is a powder that, when mixed with water, creates a beverage that is to be consumed twice a day. The label on the powder states that it is a “dietary supplement” and includes a “supplement facts” section. The supplemental facts section clearly indicates the ingredients and amount of vitamins and minerals in the product.

In this case, the Court was asked to determine whether the powder was nontaxable as a food/food ingredient. Or, if the product is subject to sales tax as a dietary supplement simply because the label identifies it as a dietary supplement.

In its response, the Court referred to Minnesota Stat. § 297A.67 (2) which states that a, “product is not exempt from sales tax as a food if the label identifies the product as a dietary supplement and it would violate federal law to label or sell the product as a conventional food.”

The Taxpayer argued that “[t]he statutory test for whether a product is a supplement is not whether the product bears a ‘Supplement Facts’ panel on the label.” Rather, it is whether the label is required by federal law that determines if the product is a supplement.

Upon review of the case the Court ruled that the Taxpayer’s product was taxable under Minnesota Stat. § 297A.67 (2). The Court found that the statute was unambiguous and that whether a product was required to be labeled as a dietary supplement was in fact determined by the product’s label. Further, a supplemental facts box on a product’s label is not required under federal law for a product to be considered a supplement.